So, a busy week next week. First up, a conference on the Euro crisis at Brown University. I'm going to be on a panel entitled Can Europe survive the Euro? I thought it might be an idea to write down a few ideas beforehand, so here they are:
Being British is not usually a qualification for balanced comment on the state of the European Union and, particularly, the Eurozone. However, UK nationality and residence does provide an interesting vantage point on the Euro’s problems, particularly for those of us who are instinctively pro-European. Unlike in more traditionally pro-integrationist countries, supporters of the EU have had to try very hard to justify pro-European arguments to a largely sceptical population. Ignoring the risks and costs of EU membership has never been an option.
For a long time, the EU had a ‘free pass’ in countries with strongly Euro-enthusiastic elites and public opinion: in Spain, for example, EU and Euro membership were widely perceived as a symbol of democratization and economic, social and cultural modernization. In Italy in the early 1990s, I was asked why my country didn’t want to ‘conform with’ (‘adeguarsi a’) the EMU project. The notion that EMU might not be self-evidently in every country’s interest appeared contrarian and rude. Pro-European Britons found themselves in the awkward position of apologizing for their government’s uncooperative and narrow-minded views. For that reason, like many others on the left, I found myself warming to the Euro idea for the simple reason that most of my political enemies hated it.
So to find myself looking at the Euro mess both from outside (Britain) and from the frontline (Italy and Spain) is awkward and embarrassing. The British Euroskeptics have been proved right (although mostly for the wrong reasons), whilst the Euroenthusiasts of Southern Europe have been hung out to dry. After enjoying a period of historically low interest rates, periphery countries have run up debt and allowed wages and prices to get too high. The causes of this situation were in large part out of their control, but they are being asked to resolve it on their own, through austerity and deflation. Meanwhile Britain, whose structural economic problems are in many ways worse than those of the Eurozone periphery, has the safety valve of devaluation and debt monetization. We may be punishing ourselves with our own brand of austerity, but at least we have no-one else to blame for this but ourselves.
The Euro’s economic failings are by now well documented and widely discussed, although policy-makers appear reluctant to take notice of them. Less attention has been paid to the political dimension of the Euro crisis, yet the politics of this are crucial. The enlarged European Union and the Euro are typical products of the institution-building style of Euro-integrationists: they are opaque, have no serious electoral chain of accountability, and they exclude a wide range of policy options from consideration. Europe has been an essentially elitist project, forged through technocratic measures whose ultimate political and economic consequences were downplayed or excluded entirely from public debate. European issues have been mostly absent from national election campaigns, and national politicians have been careful to avoid open debate on the implications of European policies and institutions. When voters have protested, the response has been either to pose the same question again, or to ignore popular decisions and seek other means of achieving the same end.
This democratic deficit is partly responsible for the Euro fiasco, because Euro membership and its possible risks where never properly debated either in national-level or European-level electoral contests. Because of the technical nature of some of the issues involved, it was the responsibility of political parties to articulate the problem in ways which would have allowed voters to make sense of the implications for them. Was the risk of brutal austerity measures or internal devaluation ever mentioned by parties and unions on the left in Eurozone countries? Was the likelihood that Eurozone policies would be dominated by one country ever mentioned in partisan debates in the European periphery? The current mess reflects not only a failure of imagination on the part of economists, but also on the part of elected politicians and union leaders, who largely signed up blithely to an economic policy consensus which is now brutalizing their constituents.
If the Euro – and possibly the European Union itself - is going to survive in its current form, new mechanisms for democratic accountability are going to be necessary. First, because clearly periphery countries can’t be expected to experience a return to the living standards of the 1970s or 1980s, simply because undemocratic institutions such as the European Central Bank or the Commission tell them to. Even if this were normatively acceptable, it wouldn’t be politically feasible – some kind of major bailout, of a kind that dwarves current arrangements, will certainly be needed, or the periphery countries will default and/or leave the Eurozone system, with disastrous consequences for everyone else. But the lack of democracy in the Eurozone’s institutions makes this kind of stand-off inevitable, running the risk of an outcome that is terrible for both core and periphery.
The second reason democracy is going to be necessary is that just as the periphery can’t be expected to suffer in silence, neither can the ‘virtuous’ countries be expected to enter into potentially open-ended transfer arrangements with the periphery without some kind of popular consent and control over the way in which transfers are managed. German governments and banks may not be deserving of much sympathy, but German workers who have accepted real wage restraint and in some cases the loss of both income and rights over the past decade or so should not be asked to bail out people in countries that have not shown the will to make such sacrifices. If Europe is to become a welfare state – and it’s hard to see how monetary union can survive if it doesn’t – then there needs to be accountability. There needs to be European democracy. Otherwise, there will be nationalism and collapse.
Trouble is, what democracy? One of the reasons the democratic deficit has been ignored over the year is that there are obvious obstacles to doing anything about it. Europe is not a ‘demos’ – it doesn’t have a common language, and its political representatives are either responsive to mainly national-level electorates, or in the case of the European Parliament, largely disconnected from their electorates. However, the EP is probably the only valid starting point for democratization – there is a kind of party system, national political parties have built coordination mechanisms and working relationships, and even though it will probably never be a party system like we find in nation-states, it is the only workable option on the table.
The Commission, the Council and the ECB need to come under the direct control of the European Parliament. Voters, in time will start to take European elections seriously, and national political parties will have to start representing their constituents’ specific interests in both national and European institutions. Easier said than done, but has anyone got a better idea?